Indonesia falls behind in mobile banking

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blackberry-indonesiaMobile phone banking has already transformed the provision of financial services in emerging markets such as Kenya, Mexico and even remote and poverty-stricken Papua New Guinea. But cautious regulators have left Indonesia lagging behind, the Financial Times reported.

Having demanded a lengthy consultation process, the country’s central bank and recently established Financial Services Authority are still finalising the rules for branchless banking and the use of mobile money.

Although banks have already started to offer existing customers a range of basic services over the internet and via SMS on mobile phones, the number of transactions has been limited by Indonesia’s lack of integrated online payment systems, and the need for customers to visit a branch to open accounts.

Once the new regulations are complete, however, Michael Joyce – the government’s mobile money policy adviser, at its poverty reduction unit – says there is a “big opportunity” for banks to lower their operating costs, which are among the highest in Asia.

“There is a very large middle class with access to banks that is not using them,” he says. “If services are offered by mobile phone, it is much more transparent and easier.”

With mobile phone penetration near 100 per cent and smartphone ownership rising rapidly, branchless banking and mobile money should allow banks to broaden their customer base substantially.

“There are many small enterprises saving maybe 50,000 rupiahs ($4.30) a day, who have a bank account but are keeping cash because using banks is too painful,” says Joyce.

Branchless banking will also make it easier for the government to distribute cash transfers to the poor, as Indonesia looks to replace its hefty fuel and electricity subsidies with targeted financial assistance.

But Joyce admits that the main beneficiaries of mobile phone banking will not be the ultra poor, who have little disposable income.

Providing a mass-market mobile phone banking service in a developing country is also likely to prove difficult, given infrastructure limitations. The GSMA, a global mobile phone industry association, says that of 219 such projects operating in 84 countries, only 13 have attracted more than 1 million active users.

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Reading Time: 2 minutes

Mobile phone banking has already transformed the provision of financial services in emerging markets such as Kenya, Mexico and even remote and poverty-stricken Papua New Guinea. But cautious regulators have left Indonesia lagging behind, the Financial Times reported.

Reading Time: 2 minutes

blackberry-indonesiaMobile phone banking has already transformed the provision of financial services in emerging markets such as Kenya, Mexico and even remote and poverty-stricken Papua New Guinea. But cautious regulators have left Indonesia lagging behind, the Financial Times reported.

Having demanded a lengthy consultation process, the country’s central bank and recently established Financial Services Authority are still finalising the rules for branchless banking and the use of mobile money.

Although banks have already started to offer existing customers a range of basic services over the internet and via SMS on mobile phones, the number of transactions has been limited by Indonesia’s lack of integrated online payment systems, and the need for customers to visit a branch to open accounts.

Once the new regulations are complete, however, Michael Joyce – the government’s mobile money policy adviser, at its poverty reduction unit – says there is a “big opportunity” for banks to lower their operating costs, which are among the highest in Asia.

“There is a very large middle class with access to banks that is not using them,” he says. “If services are offered by mobile phone, it is much more transparent and easier.”

With mobile phone penetration near 100 per cent and smartphone ownership rising rapidly, branchless banking and mobile money should allow banks to broaden their customer base substantially.

“There are many small enterprises saving maybe 50,000 rupiahs ($4.30) a day, who have a bank account but are keeping cash because using banks is too painful,” says Joyce.

Branchless banking will also make it easier for the government to distribute cash transfers to the poor, as Indonesia looks to replace its hefty fuel and electricity subsidies with targeted financial assistance.

But Joyce admits that the main beneficiaries of mobile phone banking will not be the ultra poor, who have little disposable income.

Providing a mass-market mobile phone banking service in a developing country is also likely to prove difficult, given infrastructure limitations. The GSMA, a global mobile phone industry association, says that of 219 such projects operating in 84 countries, only 13 have attracted more than 1 million active users.

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